[2011] UKFTT 717 )TC)
TC01554
Appeal number: TC/2011/04411
Self-assessment
filing penalty – taxpayer thought HMRC had issued self-assessment Notice in
error – return not submitted – late filing penalty – no reasonable excuse –
HMRC issued paper return and advised there would be no penalty if received by
them within fourteen days – condition met - HMRC authority to discharge penalty
– appeal allowed
FIRST-TIER TRIBUNAL
TAX
DAVID
ARCHER Appellant
-
and -
THE
COMMISSIONERS FOR HER MAJESTY’S
REVENUE
AND CUSTOMS Respondents
TRIBUNAL:
ANNE REDSTON (PRESIDING MEMBER)
The Tribunal determined the
appeal on 21 October 2011 without a hearing under the provisions of Rule 26 of
the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (default
paper cases) having first read the Notice of Appeal dated 12 June 2011 and HMRC’s
Statement of Case submitted on 20 July 2011.
© CROWN COPYRIGHT
2011
DECISION
1. This
was Mr Archer’s appeal against a £100 penalty for late filing of his 2009-10
self-assessment (“SA”) tax return. The Tribunal decided that the appeal was
allowed.
The
legislation
2. Under
Taxes Management Act 1970 (“TMA”) s 93, a person who has been issued with an SA
tax return and fails to send it back by the due date is liable for a penalty of
£100.
3. TMA
s 102 states that “The Board [of HMRC] may in their discretion mitigate any
penalty, or stay or compound any proceedings for a penalty”. The case of Bensoor
v. Devine [2005] STC (SCD) 97 established that an officer of the Board is
any person employed by HMRC carrying on a specific function when authorised to
do so.
4. TMA
s 118(2) states that the taxpayer can appeal a penalty on the grounds of
reasonable excuse. The legislation does not define a reasonable excuse. It has
recently been held by this Tribunal that “an excuse is likely to be reasonable
where the taxpayer acts in the same way someone who seriously intends to honour
their tax liabilities and obligations would act” B&J Shopfitting
Services v R&C Commrs [2010] UKFTT 78 (TC) at [14].
5. TMA
s 100B(2)(b) gives the Tribunal the power, in relation to a penalty which is “required to be of a particular amount” to set
it aside “if it appears that no penalty has been incurred”; to confirm it, if
it appears to be correct, and to increase or reduce it to the correct amount
if it appears to be incorrect.
The
facts
6. Mr
Archer was employed by the same employer from March 2009 and throughout the
2009-10 fiscal year. He had previously been self-employed.
7. For
the 2008-09 fiscal year Mr Archer completed his SA return online. On 6 April
2010 HMRC sent him a Notice to file a 2009-10 return. He assumed that this was
a mistake because he was now employed. He ignored the Notice.
8. The
due date for submission of the 2009-10 SA return was 31 October 2010 if filed
on paper and 31 January 2011 if filed online.
9. On
or around 15 February HMRC issued Mr Archer with a penalty notice of £100.
10. Mr Archer called
HMRC. The content of this call is disputed and I discuss it below. As a result
of the call, HMRC issued a paper copy of the SA return, and Mr Archer submitted
it within seven days. HMRC received the completed form on 9 March 2011.
11. When HMRC
processed the data on Mr Archer’s SA return they realised that a further
£155.40 should have been deducted under PAYE for 2010-11. This underpayment
arose because the wrong PAYE code had been used by Mr Archer’s employer.
The
conversation with HMRC
12.
Mr Archer’s account of his conversation with HMRC is as follows:
“when I spoke to your colleagues by phone on receipt of
the first penalty notice, I explained the situation, they understood fully and
told me they would reissue the paperwork for me to complete and return within
fourteen days. They said that as long as I followed this process then the fine
would not apply. I followed your instructions clearly and returned the
completed paperwork promptly within seven days of receipt.”
13.
HMRC’s Statement of Case says:
“on receipt of the penalty notice the appellant
contacted HMRC to advise that he had PAYE income only for 2009/10. Based on
such information, the HMRC adviser would have advised that as tax would have
been paid under PAYE, no tax liability would have been due at 31 January 2011
and so the penalty would be capped at ‘nil’. This is because for personal late
filing penalties, when a complete personal tax return proves that the unpaid
liability at the filing date was less than the penalty imposed, then the
penalty will be reduced to the figure of the unpaid liability. However, when
the appellant’s SA return was processed, an underpayment of tax of £155.40
arose because the incorrect tax code had been used by the appellant’s employer.
As this liability amount exceeded the penalty of £100, the penalty remains
chargeable.”
Reasonable
excuse
14. HMRC say that Mr
Archer does not have a reasonable excuse for late submission of the return. Mr
Archer relies on the conversation with HMRC set out above.
Discussion
and decision
15. I agree
with HMRC that Mr Archer does not have a reasonable excuse for late submission
of the return. He was sent a Notice to file an SA return, and he should either have
submitted the form, or contacted HMRC before the filing date to see if the
Notice had, as he assumed, been sent to him by mistake.
16. In my view, his
behaviour in ignoring the return does not come up to the standard of the
responsible taxpayer described by B&J Shopfitting (quoted earlier in
this Decision) and there are no other factors which provide him with a
reasonable excuse.
17. However, this case
does not turn on the requirements for a reasonable excuse but on HMRC’s
exercise of their statutory powers.
18. HMRC are
authorised under TMA s 102 to discharge or reduce a penalty. They have made no
submission that its call centre staff do not have the authority to discharge or
reduce a penalty for late filing. Instead, they say that no such promise
“would” have been made.
19. The Tribunal can
only decide cases on the evidence. Mr Archer has given a clear account of his
call to HMRC. He says he was told that “as long as [he] followed this process
then the fine would not apply”. In that sentence “this process” refers to
completing and returning the SA form within 14 days. His record of the
conversation does not mention the quantum of PAYE deducted, any possible
shortfall, or any link between such a shortfall and the penalty amount.
20. HMRC have not
produced any record of that call. Their Statement of Case says only that “the
HMRC adviser would have advised...”. That is supposition, not evidence.
HMRC have therefore not rebutted the evidence put forward by Mr Archer.
21. The evidence
before the Tribunal is that HMRC promised to use its powers under TMA s 102 to
discharge the penalty if Mr Archer met the 14 day turnaround time. He states
that he did meet the deadline, and HMRC do not disagree.
22. The Tribunal has
considered its powers under TMA s 100B(2). It appears to the Tribunal that no
penalty has been incurred by Mr Archer, because the sum originally charged by
the Notice issued in February 2011 was subsequently discharged by HMRC under
their statutory powers. The imposition of a £100 penalty is thus not correct
and Tribunal allows Mr Archer’s appeal.
23. This document
contains full findings of fact and reasons for the decision. Any party
dissatisfied with this decision has a right to apply for permission to appeal
against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal)
(Tax Chamber) Rules 2009. The application must be received by this Tribunal
not later than 56 days after this decision is sent to that party. The parties
are referred to “Guidance to accompany a Decision from the First-tier Tribunal
(Tax Chamber)” which accompanies and forms part of this decision notice.
Anne Redston
TRIBUNAL PRESIDING MEMBER
RELEASE DATE: 9 NOVEMBER 2011
